Could the fallout from Brexit influence international freight in the future?

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September 9, 2016

More than most industries, the success of international freight shipping is heavily dependent on global events and relationships between countries and economies. Even the best-laid plans can be impacted by major changes in international relations, and it’s important for people looking to ship heavy machinery between countries and continents to consider what the potential repercussions may mean for them.

One recent event that could have a significant impact on the way companies send and receive heavy equipment is Brexit. With the United Kingdom voting to leave the European Union, there may be ongoing impacts to various types of transportation that link the UK with the rest of Europe. While the UK’s actual exit still remains to be seen, and will be a couple of years away if it does happen, it’s still worth investigating what it may mean for international shipping, especially as there was an immediate fallout following the vote.

Is the initial reaction a sign of things to come?

In the days following the referendum result, the value of the pound dropped dramatically, with Forbes reporting the currency reached lows not seen since since 1985. The pound has begun recovering, but other sources such as Barclay’s have declared that fluctuating value means uncertainty is likely to be the new normal for the pound in the future.

Uncertainty around currency value is at an all-time high.

Business Insider reiterated that not only is there growing uncertainty about currency value, but that this feeling is at an all-time high as well. It’s a trend that can make organisations feel uneasy when it comes to considering the purchase of large assets or the specifics of major shipping projects.

This focus on cost could become even more important if the UK’s relationship with various transport options in EU nations begins to change, especially when considering what it means for the use of airspace and other regulatory requirements.

Air freight between the UK and EU could change

Broadly speaking some of the most significant changes that could be enforced if the UK leaves the EU involve air freight and aviation rules, specifically which regulatory bodies they are governed by. When it happens, the UK will no longer be a member of the European Aviation Safety Agency (EASA). The organisation is responsible for enforcing aviation standards across Europe, but is not limited solely to EU nations.

However, if the UK were to become an EASA member as a non-EU nation, it would lose its ability to vote for any legislation changes that would affect European aviation law, and would be forced to comply unless negotiated otherwise.

Depending on the state of the UK’s membership with other authorities such as the European Common Aviation Area and the EU Emissions and Trading Scheme, there may also be significant regulatory requirements for airlines to meet in terms of efficiency. It’s an area that law firm Norton Rose Fulbright notes has been a major pain point for organisations in the industry.

Shipping to hopefully remain stable in the wake of Brexit

Unlike the aviation sector, the shipping industry is governed by fewer EU-specific regulatory bodies and laws, which will hopefully reinforce sea freight as a stable option for freight forwarding despite other elements of uncertainty. Norton Rose Fulbright also reported on this part of the shipping industry in its review of the Brexit referendum, stating that regardless of the UK’s EU membership status, it will still need to conform to international shipping regulations the same way it has always done.

Sea freight could remain stable in Europe following Brexit.

The only thing that may affect shipping in the region is the EU’s ongoing focus monitoring greenhouse gas emissions for shipping vessels, an initiative that’s set to become even more strict over time. It’s a condition that will be applied to EU ports, meaning that any ship docking there will be tasked with meeting these guidelines, whether it’s from a country that is part of the EU or not.

What could Brexit mean for other compliance concerns?

When investigating international freight for heavy machinery, there are further concerns beyond just the type of vehicle that will be used for transport. One of the most pressing concerns, and one that will almost certainly change is insurance. As law firm Ince & Co reported, insurers that are based in the EU can write policies that apply to all other member countries. The idea is that the insurer doesn’t need to be regulated in each member state individually, instead being able to insure shipping for the EU as a whole.

Therefore, if Brexit goes through, it may restrict the ability for some insurers to operate across both the EU and UK. If organisations typically use specific providers, it could force a major change in the way they operate.

International shipping is heavily affected by global events such as Brexit. If the UK is to leave the EU, it will force organisations to rethink many of the compliance concerns that come with sending large pieces of machinery across the world.